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Impact/React: A Debate About Philanthrocapitalism

Tuesday, January 26, 2016

Impact/React

Brian Emmett & Bernadette Johnson

Impact/React is a new blog series that explores issues facing the charitable sector from two opposing points of view.

When Mark Zuckerberg and his wife, Dr. Priscilla Chan, announced last December that they plan to commit 99% of their Facebook stocks, roughly $45 billion, to launching a charitable initiative, the world was astounded by the unprecedented scale of the gesture. Later, as the details of the arrangement became clear, that the money wasn’t a donation, but a limited liability company devoted to charitable causes, for many, their opinion began to shift.

At Imagine Canada there was a lively internal debate on the subject. Our Chief Economist, Brian Emmett, and Public Policy Manager, Bernadette Johnson, squared-off, debating their opposing views on the subject. Their conversation so captured the complicated nature of the shifting trend toward philanthrocapitalism that we decided the best commentary we could provide on the subject, was excerpts from their original emails:

b.e.The Zuckerberg announcement has generated a huge amount of controversy and what, to me, is a baffling amount of somewhat bitter contempt of what is called a “PR move”. It is hard to call it a PR move when the announcement is accompanied by a $45 billion commitment to charity. The way to assess these mega-donors is not theoretical but practical – have these actions made a difference in the lives of people?

b.j.I have two principal concerns with this type of philanthrocapitalism. Firstly, if we’re going to get the public beyond the idea of charity as a recreational pastime, we need to uphold certain standards in lending credibility to leadership and decision-makers. Is supporting anyone with a will and enough money as a sector leader being sufficiently respectful of the experience of those who commit their professional lives to sector causes? Secondly, the democracy issue carries a lot of weight here. The trend of philanthrocapitalism involves the development of social policy by actors unaccountable to the public, and outside the realm of state regulation. If democracy is at least a principle to be defended, the formation of “new and innovative” social policy planning without representation or accountability is problematic.

b.e.Consistency with democracy is a real and valid issue. Ideally, voters should determine social priorities which would then be funded from government revenues raised by an equitable tax system. But it is not the messy democratic system we live in - even less the Americans with their lack of appetite for social programs. Governments are free to enact visionary social policies aimed at eliminating the injustices that are deeply rooted in society - but they show no inclination to do so largely because there is a lack of democratic support for them. Until the distant date on which governments and their electorates become smarter and more inclined to tackle root social issues, we are left with living in the world of the second best. We should evaluate what Zuckerberg is doing in a real-world context.

b.j.If there is a decreased appetite for government-led social policy, it is evermore incumbent upon our sector to address social problems. Networks of charities have evolved to operate within a web of accountability with the government, unlike the growing incidence of these individual and highly influential billionaires. The majority of which, I’ll add, are not representative of the diversity of the communities they are designing programming for. Social programming is meant in large part to address problems created by the widening income gap - does it make sense to have billionaires attempt to fix these?

b.e.Large-scale philanthropy like this brings with it a business mindset, a view that techniques learned in the private sector are equally applicable to the challenges of social change and the environment. This may clash to an extent with a sector which has traditionally been more comfortable talking at the level of “good people doing good things”.

b.j.Philanthropists might take more risks and be freer to innovate, but the social service delivery sectors have much different risk profiles than business – those who stand to lose are not investors, they are service users. Do the potential benefits outweigh the negative consequences of “innovation” as it is known in the business world? And in the case of charity, who shoulders the consequences? You cannot simply impose a business model mindset onto the work done in this sector and expect gains in the same terms. The implication is that success in business will automatically translate to success in charity - that these wealthy folk possess not only money, but unique wisdom skills that are lacking in the sector. At the risk of sounding facetious, would a charity CEO be immediately qualified to make transformational decisions regarding the future and direction of the business sector?

b.e.It’s true that charitable efforts of billionaires have experienced some notable failures – Gates and Zuckerberg’s efforts with education are a good example of over emphasis on measurement and results. But these negatives are more than offset by big benefits of the Gates Foundation efforts in health in the developing world. One of the attributes tech billionaires do bring to philanthropy is an appetite for big projects, an acceptance of risk and of the need for patience in achieving game-changing outcomes.

b.j.Philanthropic giving has long existed as part of the gift economy, and Zuckerberg is not simply adding new economic tools to the philanthropic toolkit. He is helping to facilitate a greater repurposing of philanthropy, where certain kinds of charitable methods and results become a means of investment into social and other outcomes. I see this event as part of a wider shift taking place with philanthropy.

b.e.We also live in an information-based world in which innovation and knowledge are the keys to advancing the quality of life. The infusion of new ways of thinking about philanthropic businesses from the ultimate knowledge and information based sector is not a cause for concern – it is to be welcomed. To me the bottom line is empirical; the world is better off if billionaires invest their money in the way Zuckerberg, Gates and Buffett have chosen as opposed to yachts and sports teams.

b.j.If I were to be glib, my position would be summed as: The sector needs Zuckerberg’s money; but do we need Zuckerberg? But in all seriousness, I think the sector would benefit from a distinction drawn between what he is doing and what charity is about.

b.e.What I find most troublesome is the conservativeness of this discussion - an odd observation perhaps to make about commentators who would regard themselves as progressive. But to me these comments are conservative, not in an ideological sense but in a “we do not want to change” sense. This is neatly summed up by the comment that we would be happy if the money came to us. Zuckerberg with his new ideas and new approaches - which may or may not work - is the problem. He should go away. What we really want is the status quo with more money.

b.j.It’s not because Zuckerberg’s ideas are new that I have concerns - I am wondering about his qualifications. His track record in philanthropy isn’t very good, he stated his previous moves were about making him a better philanthropist (and the service users are there to enable this training, I suppose). Even in the context of a success, can we really say it was Gates’ inventiveness that saved 5 million lives in combating preventable disease, or was it his money? Did he do anything that a long-standing foundation or network of charities couldn’t do with that money, and would charities have made as many disastrous mistakes? Many argue no, and no.

b.e.To me, your note does not show a particular failure of philanthrocapitalism but demonstrates that doing programs well is an extremely tough business. In turn, this seems to point to the usefulness to explore new approaches for social priorities where experience has shown it is difficult to make things work.

b.j.Shifting the conversation to advocacy, the Zuckerberg and Chan pledge takes advantage of the relative lack of restrictions with the LLC model. This is an important precedent as it means he will have a greater relative voice than charities do on setting the policy agenda. We should consider whether Zuckerberg is the man to do advocacy in the name of charity, and the fact that there is potential for profit-making adds another layer of complexity. Will he be advocating for a systemic rebalancing of society by addressing issues linked to socio-economic inequalities? Likely not.

b.e.However you choose to describe it, change will happen. It will happen via the Zuckerberg route or by the Larry Page route (keep the money inside the corporation and internalize the philanthro in philanthrocapitalism.) Charities should be wary of adopting a position that portrays them as old-fashioned and reluctant to change.

b.j.There is a lot at stake in the shifts we are referring to, and I feel the label of ‘conservative’ or ‘traditional’ serves to mask valid, practical concerns that charities might have as we move into this new frontier of philanthropy. In addition to that, there is a certain wisdom in the long-standing practice of giving to charitable actors that are trusted by the collective to know where these funds need to be allocated. It worries me that our society seems to be losing sight of this.

About the Authors

Chief Economist for Canada’s Charitable and Nonprofit Sector, Brian Emmett is tasked with measuring the impact of the sector and bringing economic issues facing charities and nonprofits to the forefront of public policy decision makers. Mr. Emmett is an economics graduate of the University of Western Ontario and the University of Essex in England, and has enjoyed a long and distinguished public service career.

Bernadette Johnson holds an MA in Conflict Studies and a Master’s in Philanthropy and Non-Profit Leadership. Bernadette’s background is in Indigenous historical research, most recently as a research coordinator for the Truth and Reconciliation Commission. Current projects include a hobby social enterprise and research on the impact investing marketplace.

Comments

Loved the debate but I am with Brian. Status quo has not changed the world fast enough and the current foundation/charity model is weighed down by hubris beliefs that they are the only ones who know best how to implement durable and lasting change - but that is arguable since it is the people who live in the communities these organizations serve that actually have the answers. Partnership and collaboration have always yielded the best results. Collaboration with billionaires who have experience actually changing the world, assuming they are good at listening to the constituents they want to serve , that is where I will put my hope - on the big bold visionaries. Maybe they will fail sometimes but so do foundations and charities - but the old guard are just less transparent about measuring failure as it can lead to less funding. There is a place for everyone to work together.

Great debate. Thank you both for engaging and sharing. I'm with Brian, even though I am deeply wary of the "master of the universe" rhetoric of philanthrocapitalist cheerleaders. Let's be frank. The philanthropic tradition has always been intertwined with capitalism and the creation of wealth. And it has always had a healthy dose of vanity, ideology and unsuccessful projects. The professionals inevitably step in to guide the deployment of the philanthropic wealth. Just like Ford, Rockefeller, Carnegie, Buffet, Gates, etc. I'm grateful that to see Chan and Zuckerberg's commitment to public benefit, even though it is poorly defined at the moment. One aspect that is rarely mentioned in the debate about the Chan/Zuckerberg announcement is the personal dimension of the timing: the birth of their first child. Kid, you are only getting a fraction of this wealth. We're not really sure what we're doing with the rest -- despite all the professionals who will tell us -- but kid, don't bank on receiving it.

I, too, am with Brian. To say give me your money but get out of my business may well be the reason we've made such little progress on some of our biggest social issues. New money and new players will most certainly disrupt the status quo of our sector, but I'm more interested in seeing lasting, positive change than demonstrating sufficient respect for "the experience of those who commit their professional lives to sector causes". If Zuckerberg and his money can help make that happen, I say "welcome to the table" Mark! Your money, business sense, your connections, platform for engaging and influencing others, your creativity are all needed here... we'll fill you in on what you need to know about the problem and perhaps together we can make some change happen!

I have two concerns. The first is that we might be revisiting debunked New Public Management approaches with philanthrocapitalism. The second is that entrepreneurs are expected to be innovative, and most solutions to social problems aren't that sexy.

I'm with Bernadette. Billionaire philanthropism is a symptom of a greater disease - underfunded governments. We've been cutting taxes (especially in the US) for so long that governments cannot afford to provide many services or maintain existing infrastructure, let alone give money to charities. Our governments divide their constituents into two groups: taxpayers, who are honoured and respected, as they are the source of political donations; and everyone else, especially the poor, who are pretty much safely ignored. Billionaire philanthropism shifts responsibility for helping our vulnerable away from government and the accountability that goes with it.
I don't want Mark deciding who wins and who loses. If he can afford to give away 99% of his money, then the big lesson is that he doesn't need so much and his taxes are too low. We should be pushing to increase taxes, not passively accepting that the current income equality brought about by low tax regimes is normal, or moral. Part of making a more equitable society includes helping the vulnerable sector. As Bernadette says, charity is not a recreational pastime.
It's hard to change an unfair system by surrendering to it.
I really enjoyed reading the discussion - thank you for posting it.